Global sales of battery electric vehicles are projected to increase by 30% in 2025, reaching 15.1 million units, according to S&P Global Mobility. This surge is anticipated to elevate the market share of battery electric vehicles to 16.7% of light vehicles.
However, the electric vehicle industry is facing a cloud of uncertainty due to potential policy changes and tariffs. The upcoming presidency could bring significant shifts in tax incentives and other policies affecting electric vehicle manufacturers and consumers.
Currently, consumers in the U.S. can benefit from a federal tax credit of up to $7,500 for certain new electric vehicles. Yet, there is speculation that these incentives could be at risk under the new administration.
President Trump has been critical of the federal tax credit for electric vehicles, labeling it as part of a 'green new scam' that could harm the auto industry. The administration's stance on deregulation may offer some relief to carmakers, although the overall impact remains uncertain.
Despite the potential benefits for the industry, tariffs pose another challenge. The global nature of electric vehicle production, with parts moving across borders, makes the industry vulnerable to trade disputes. Threats of tariffs on imports from various countries could disrupt production and sales.
China and the U.S. are the largest markets for electric vehicles, with Tesla holding a dominant position in the U.S. market. Automakers are closely monitoring the situation to gauge the impact of potential policy changes and tariffs on their operations.
Amidst this uncertainty, the broader auto industry is proceeding cautiously. S&P Global Mobility forecasts a slight decline in light vehicle production in 2024 and 2025, as automakers adjust their production to align with demand. However, overall light vehicle sales are still expected to increase in 2025.
The shift towards electric vehicles is influencing production decisions, with companies like Ford and General Motors reallocating production capacity to electric vehicles. The industry is navigating a complex landscape of policy changes and trade tensions as it moves towards a more sustainable future.
